How to Prioritise Multiple Overdue Accounts

Having one overdue account is annoying. A bit of an irritant, but not too difficult to deal with. Five is a problem, and something that needs a bit more effort to fix. But fifteen, spread across different customers and sectors, all for different amounts, can feel like a full-time job, and one that nobody has time to do properly. When that happens, you need to do some organising, and it can be tempting to put the oldest debts at the top of the list, or chase whoever seems most likely to pay. Neither of those is a strategy, so you’ll probably get fairly mixed results. The businesses that recover the most the fastest aren’t the ones who treat every overdue account the same. They’re the ones who decide what action each account actually needs individually.

Why it Isn’t Always ‘Oldest First’

We’re not saying that the age of the debt doesn’t matter; it absolutely does. What we’re saying is that it only forms one piece of a much wider jigsaw puzzle. For example, let’s say you have 3 invoices that are overdue:

• Number 1 is 90 days overdue, and the customer has been intentionally ignoring your attempts to get in touch.
• Number 2 is also around 90 days old, but this customer has a genuine issue with the work.
• Number 3 is 20 days late, and for £400.
• Number 4 is also 20 days late, worth £25,000, and owed by a customer who’s been showing signs of financial trouble.

If you chased all 4 of these the same way, you’d end up wasting time chasing accounts that would have been paid anyway, while the ones that really needed your attention slipped further and further away. And since most small businesses spend an average of 86 hours a year chasing late payments, the less time you can spend, the better.

How to Get Your Priorities Sorted

So the question is, how do you figure out which accounts deserve your attention first, and which ones can wait? We have 4 steps you can follow:

Step 1: Get it all in one place

You can’t prioritise what you can’t see. So before you do anything, pull together a single list of every overdue account. For each one, note down:

• Amount and age of each outstanding invoice.
• The contact history (what’s been sent, when, and whether anyone has replied).
• Any disputes or queries that have been made,
• What relationship you have with the client, how much ongoing work you do for them, and whether you want to keep doing it.
• Any warning signs you might have noticed, like changes in their behaviour, or credit information you hold on their financial health.

All of this information probably lives in emails, notebooks and people’s heads at the moment, so having it all in one place will help you make more informed decisions.

Step 2: Sort accounts by type

Most late payments or overdue accounts will fall into one of 5 categories, and each one needs a different approach. Your next step is to go through that account list and sort them into the right categories. Give each one a label:

Forgetful, but engaged: These are the ones who have acknowledged the invoice, and there’s no problem in the pipeline. They just haven’t paid it. A firm, friendly reminder with a clear deadline usually does the trick here.

Disputed: They’ve raised an issue with you about the work, and are holding off paying until things are resolved. Don’t chase the invoice here, focus on dealing with the issue, documenting everything as you go, and follow up with payment dates once there is a clear path or solution in place.

Silent: There’s been no reply to your emails, they don’t pick up the phone, and your letters disappear into the ether. Since silence doesn’t tell you anything, it’s best to move these up the escalation ladder quickly and try other routes.

At Risk: The history talks here. Look for partial payments, broken promises, requests to renegotiate, or adverse credit information. These accounts need more urgent attention because the longer you wait, the more likely you are to be one of the many creditors that are queuing for what’s left.

Habitual late payer: The individual invoices might not look alarming, but when you see the pattern, you see the problem. This should inform how you deal with them now and how you should approach them in the future.

Step 3: Score each account

Now that you have an idea of what types of overdue accounts you have, you can score each of them in a ranking system. It doesn’t need to be complicated; just a simple scale of 1-5 works perfectly here. You need to calculate things like the value of the invoice and the cost of chasing it, how old the debt is, whether the client is showing signs of financial distress, and how important it is for you to keep the customer in the long term.

Step 4: Match the action to the account

Finally, you need to decide which actions you need to take for each invoice. This should essentially follow your escalation ladder, and range from an early reminder and follow-up call to final demands and moving to recovery action. Not every invoice will sit at the same point on the ladder, even if they’re owed by the same client, and they won’t all be at the first rung. You need to decide where each account sits and when it moves, rather than letting them all drift and treating them the same.

The Law is On Your Side

Remember, when it comes to late payments, the law is on your side. Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge statutory interest at 8% above the Bank of England base rate on all overdue B2B debts. And you absolutely should! Late payments cost you money, and this is a way to recoup some of that cost.

On top of that, you can also claim fixed compensation for each overdue invoice, if you would like to. The amount you can claim varies depending on how much is overdue:

• £40 for debts under £1,000
• £70 for debts between £1,000 to £9,999.99
• £100 for debts over £10,000

Because the compensation is per invoice, an account with several overdue invoices adds up, and it gives you something concrete to mention in reminders and formal letters.  You are entitled to claim recovery costs instead of the compensation listed above, if you do incur any recovery costs, such as using a debt recovery firm.  

At Debtcol, we handle everything from a single unpaid invoice to dozens of overdue accounts at once. Our knowledge of contract law and debtor behaviour across many commercial sectors means we can work out the right approach for each account, helping you reduce debtor days, improve cash flow and spot disputed accounts early. If you’ve got more overdue accounts than time to chase them, find out more about our multiple debt recovery service or get in touch with our team today.